This pilot study is a randomized, double blind safety, efficacy and pharmacokinetic study of oral lobucavir compared to placebo in patients with chronic hepatitis B (HBV). There are 2 stages to this study. Stage I is completed. State II of this study is a placebo controlled randomized comparison of three active doses of lobucavir with a treatment period of 3 months. A total of 70 subjects will be randomized in a 1:2:2:2 manner (placebo, 200 mg QD, 400 mg QD, 800 mg QD). There is a 3 month follow up period.